IT may get Rs 2,200 crore from shipping companies
CBDT — which governs I-T departments all over the country — is preparing a draft, which if approved by the Bombay HC, would make Mumbai's I-T department richer by at least Rs 1,000 cr, reports Manish Pachouly.business Updated: May 04, 2007 21:50 IST
The Central Board of Direct Taxes (CBDT) — which governs I-T departments all over the country ­— is preparing a draft, which if approved by the Bombay High court, would make Mumbai's income tax (I-T) department richer by at least Rs 1,000 crore. The CBDT will submit its draft to the court on June 12.
The money, which would come in the form of tax deducted at source (TDS) from companies that lease ships, would see the I-T department's coffers get richer by Rs 2,200 crore (on national level).
Acting on a petition filed by the Indian National Shipowners' Association (INSA) this February, the Bombay High Court recently asked the CBDT its view on whether payments made for leasing ships can fall under the 'rent' category. INSA had approached the court challenging the I-T department's decision to term as 'rent' the payments made for leasing ships.
The I-T department's decision came following an amendment to the Income Tax Act in July 2006, which brought rent on 'plant and machinery' under the purview of TDS. And the I-T department categorises ships as 'plant and machinery' bringing any lease payments under TDS.
Following the July 2006 amendment, the I-T department sent notices to shipping companies in the city asking them to pay TDS at the rate of 22.44 per cent. This is substantially higher than the two per cent the companies so far paid as tax on earnings from freight and charter operations.
On receiving the I-T notices, INSA wrote to the finance and shipping ministries protesting the amendment. But it moved court in February when the ministries failed to respond.
The I-T officials are hopeful the CBDT would submit a view endorsing their claim that payment for leasing of ship can be classified as 'rent'.
According to I-T officials, 60 of the 190 shipping companies across the country are in Mumbai.